The history of online ad fraud and what you can do about it

Get a brief history of online ad fraud to ensure your ad campaigns remain brand safe and profitable.

• Learn where online ad fraud started and how it’s evolved over time
• Find out what ad fraud schemes Oracle Moat has foiled
• See how to avoid or mitigate the consequences of online ad fraud

Advertisers look to protect their ad spend and brand reputation from invalid traffic (IVT) and fraud.

IVT and fraud waste your ad spend, can throw off your measurements, and hurt your brand.

But what are invalid traffic and ad fraud? How do you look out for them?

And where did they start? 

Let’s go back in time to look at a brief history of online ad fraud.

The beginnings of online ad fraud

The Encyclopedia Britannica defines ad fraud as “misleading representation of goods or services conveyed through false or fraudulent claims or statements that are promoted by a business or other advertising agent.”

Even a half-truth can get you in trouble.

The Federal Trade Commission of the United States says deceptive, fraudulent advertisements are “misleading in material respect.”

In fact, multiple laws and the Federal Trade Commission came into effect during the early 20th century to combat fraud. The 1914 Federal Trade Commission Act extended fraudulent advertising beyond just untrue statements advertisers might make. It included claims an advertiser makes without any reasonable basis, even if, in the end, it turns out to be true. 

Even if the advertiser has good intentions or the buyer didn’t know the ad was fraud doesn’t allow for loopholes. According to the law, the government doesn’t have to prove that any deception was intentional.

Fast forward to the 1950s and 60s. Television exploded in popularity after World War II. 1948 saw almost 200,000 TV sets across the US, a number that would substantially grow over time.

The FTC required advertisers to provide information to back up any claims they made in their publicity. After all, TV forced an expansion of the concept of truth in advertising.

Its combination of visuals, sound, music, and motion made it able to stretch and distort the truth.

In 1971, the National Advertising Division (NAD) of the Council of the Better Business Bureaus created a National Advertising Review Board (NARB) to evaluate and investigate complaints about potentially fraudulent advertising.

The US Lanham Act (passed in 1946) allows customers, competitors, and other injured parties to bring charges against agencies and companies for deceptive ads.

Now consider the dawn of the internet.

Banner ads, sponsored posts, and other ads have appeared online since the internet’s beginning.

AT&T ran the first banner ads on HotWired.com in 1994 (and scored a considerable click-through rate of 44%).

1998 saw the birth of pay-per-click (PPC). A search engine called Goto.com offered businesses to pay to come up first in search engine results for specific keywords.

That same year, Google debuted and saw the potential of PPC.

With this innovation came temptation and malpractice. There wasn’t much awareness of online fraud back then and not much to stop someone from claiming they got a higher number of clicks than they actually did.

A research paper published in 1999 sounded the alarm that online ad fraud was already taking place.

Get ahead of the game. Find out how to protect your ad spend from invalid traffic and fraud to stop fraud schemes dead in their tracks.

The mid-2000s: click fraud escalates

A 2006 article on WIRED.com warned that click fraud could engulf the internet. Both Google and Yahoo faced lawsuits over click fraud.

In response, Google published a paper detailing their strategy to combat false clicks and even appointed a “Click Czar” to oversee its efforts.

2006 and beyond: Beware the bots

Over the next decade or so, as digital advertising became increasingly en vogue, bots plagued many a digital platform and campaign.

Though these bots were automated, they passed themselves off online as multiple users, inflating the number of clicks and wasting away advertising budget.

Let’s look at three of the more notable ones.

Methbot: the largest online advertising fraud scheme of its time

First discovered in 2015 and finally taken down in 2017, Methbot originated in Russia (though it was not a state-sponsored fraud campaign) and targeted networks across Europe and North America.

Methbot used variants of famous web publisher names to create fake web pages to draw traffic away from legitimate ones. Around 570,000 bots mimicked normal user behavior while clicking on links on those fraudulent web pages.

The bots watched about 300 million videos a day. Clicks reached somewhere between 200 and 300 million a day. Its operators raked in about 3 to 5 billion dollars a day while costing the ad industry $180 million to a billion.

3ve: the sequel to Methbot

With Methbot’s fall, its operators came up with 3ve, which used a network of malware bots to access 1.9 million infected computers. It gamed ads.txt by creating composite URLs from outdated ads.txt lists.

Its operators scored $29 million before going down.

DrainerBot: a focus on mobile devices

2019 saw the discovery of DrainerBot. Malware of its generation could operate inside an app, even if the device wasn’t in use (i.e., called click injection or click spamming).

DrainerBot hid in apps available on the Google Playstore for Android devices. Once a user downloaded such an app, DrainerBot could click on hidden ads or watch videos in the background.

The infected apps consumed a significant amount of bandwidth and battery power. They could even drain more than 10GB of data if the device was in sleep mode or not in use.

The Oracle Moat team actually uncovered DrainerBot and helped mitigate the damage it was doing. Get the details here.

Measurement can help detect fraud. Check out this infographic to learn 5 best practices for results-driven ad measurement.

Online ad frauds uncovered by Oracle Moat

Despite Facebook, Google, and Oracle Moat enforcing action against ad fraud, it still runs rampant across paid search, paid social, affiliate marketing, over-the-top media, and CTV.

In 2020, the team at Oracle Moat discovered StreamScam, the largest CTV ad fraud scheme ever. It involved just over 28 million US valid household IP addresses, approximately 3,600 apps, and 3,400 unique CTV models.

Watch this on-demand webinar to learn about the discovery and how to overcome such a scam to make the most of CTV.

More recently, the team at Oracle Moat foiled two other ad fraud schemes:

• Mangago – This anime site with adult and pirated content made advertisers think they were showing brand-safe ads on online lifestyle magazines. When the Oracle Moat team discovered the scheme, they made public how Mangago deployed context spoofing, which uses redirected domain and page content to increase the cost per thousand impressions (CPM) value of their ad placements.

Check out this blog for details about what went into the Mangago fraud and how to not let similar frauds trip you up.

• KissFraud – With this scheme, users misrepresented users watching pirated video content as consumers of innocuous news sites. It made advertisers believe their ad impressions occurred on brand-safe news sites when their ads were actually served up on sites hosting pirated video content.

Get more details on how to avoid this type of context-spoofing fraud by reading this blog.

How brands can avoid or mitigate the consequences of online ad fraud

Major organizations have offered refunds to users victimized by ad fraud, but many of these organizations suffered consequences from ad fraud themselves.

They’ve cut their ad spending and are becoming more vigilant. They’ve also issued guidelines and recommendations to help curb the threat.

What can you do to help stave off online ad fraud? Follow any guidance and recommendations from experts. Also, follow these critical steps:

• Validate your metrics – Make sure the numbers you see coming in look right and are valid. Check as many times as possible. If something looks off or unrealistic, investigate right away.
• Watch your ad spend – Put your budget where it’s most needed and makes the most sense. Plus, keep a close eye on it and the results your ad campaigns produce.
• Demand transparency  – Whatever platforms, partners, agencies, and publishers you work with, demand transparency. Insist on everyone laying their cards on the table and making it easy to see what everybody else is doing.

Check out these resources to help you deal with invalid traffic, ad fraud, and measurement:

• How to protect your ad spend from invalid traffic and fraud (ebook)
• 5 best practices for results-driven ad measurement (infographic)

Learn more about how Oracle Moat exposes online fraud schemes.

• Read about the exposure of DrainerBot and resources to mitigate the damage such a scheme cause
• Watch this on-demand webinar to learn about the discovery of StreamScam and how to overcome such a scam to make the most of CTV

See how to measure your media performance across your digital and advertising campaigns with Oracle Moat.